As of June 17, 2025, Costco Wholesale Corp's estimated intrinsic value ranges from $171.40 to $1548.39 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $1548.39 | +57.3% |
| Discounted Cash Flow (5Y) | $1099.62 | +11.7% |
| Dividend Discount Model (Multi-Stage) | $930.05 | -5.5% |
| Dividend Discount Model (Stable) | $378.24 | -61.6% |
| Earnings Power Value | $171.40 | -82.6% |
Is Costco Wholesale Corp (COST) undervalued or overvalued?
With the current market price at $984.36, the stock appears to be fairly valued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Costco Wholesale Corp's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.42 | 0.49 |
| Cost of equity | 5.8% | 7.6% |
| Cost of debt | 4.0% | 4.5% |
| Tax rate | 24.4% | 24.4% |
| Debt/Equity ratio | 0.02 | 0.02 |
| After-tax WACC | 5.8% | 7.5% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $1,100 | $479,760M | 83.9% |
| 10-Year Growth | $1,548 | $678,871M | 71.0% |
| 5-Year EBITDA | $631 | $271,934M | 71.6% |
| 10-Year EBITDA | $977 | $425,316M | 53.8% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $4,428M |
| Discount Rate (WACC) | 7.5% - 5.8% |
| Enterprise Value | $58,857M - $77,000M |
| Net Debt | $(8,119)M |
| Equity Value | $66,976M - $85,119M |
| Outstanding Shares | 444M |
| Fair Value | $151 - $192 |
| Selected Fair Value | $171.40 |
| Metric | Value |
|---|---|
| Market Capitalization | $436741M |
| Enterprise Value | $428622M |
| Trailing P/E | 55.69 |
| Forward P/E | 38.55 |
| Trailing EV/EBITDA | 6.75 |
| Current Dividend Yield | 35.14% |
| Dividend Growth Rate (5Y) | 57.24% |
| Debt-to-Equity Ratio | 0.02 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $464.52 |
| Discounted Cash Flow (5Y) | 25% | $274.90 |
| Dividend Discount Model (Multi-Stage) | 20% | $186.01 |
| Dividend Discount Model (Stable) | 15% | $56.74 |
| Earnings Power Value | 10% | $17.14 |
| Weighted Average | 100% | $999.31 |
Based on our comprehensive valuation analysis, Costco Wholesale Corp's weighted average intrinsic value is $999.31, which is approximately 1.5% above the current market price of $984.36.
Key investment considerations:
Given these factors, we believe Costco Wholesale Corp is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.